Chevron's Board to Cut Compensation for Executives Due to Safety Issues

Chevron Corp.'s board is cutting compensation for its chief executive and other top executives in the wake of a string of accidents and other operational problems since late 2011, according to people familiar with the matter.

Chevron's board on Wednesday trimmed equity awards by 11% and bonuses by at least 10% for Chairman and CEO John S. Watson and several other executives, one of the people said.

"When things go poorly, the pay should reflect it," this person said. The directors "absolutely want to deliver a message to management."

Chevron has been performing well financially. But in February, the company disclosed it reduced the number of stock-options and performance shares awarded to Mr. Watson from last year, without revealing the bonus cuts or explaining the cause of the reductions. Mr. Watson's 2012 compensation package was valued at $24.7 million, about half of which came from equity grants awarded the previous year.

The same equity awards, which are tied to how Chevron's stock performs, were reduced for four other top executives, according to filings with the U.S. Securities and Exchange Commission.

Lloyd Avram, a spokesman for the company, said the board was still meeting.

"The company does not have a comment to provide until such time as the board meeting has concluded," he said.

Unlike other oil companies criticized in recent years for lavishly rewarding top brass, Chevron's executive pay practices have not prompted controversy among shareholders. An advisory vote on its compensation for 2012 was supported by 95% of votes cast at Chevron's annual meeting last year.

The San Ramon, Calif.-based energy giant has been leading its peers in profit and stock performance; shares are up 12% this year, outperforming larger rival Exxon Mobil Corp., and its $233 billion stock-market value recently topped that of Royal Dutch Shell PLC.

But Chevron has also suffered a string of operational setbacks since late 2011. Oil leaks from the seafloor at its Frade field off the Brazilian coast in November 2011 and March 2012 led the company to halt production there, forfeiting daily production of 29,000 barrels of oil and its equivalent in natural gas. The field has yet to restart and Chevron is still fighting the resulting legal quagmire.

In January 2012, a drilling rig in Nigeria operated by a Chevron subsidiary exploded, resulting in two deaths. And in August 2012, a huge fire broke out at its Richmond refinery after a badly corroded pipe ruptured. A state agency said in January it would seek fines totaling nearly $1 million for the incident.

Safety has become critical for oil companies operating under increasingly tough regulatory scrutiny, a concern heightened by the 2010 BP PLC Gulf of Mexico oil spill.

Mr. Watson earlier this month touted Chevron's safety performance to analysts in New York, saying that its 250,000 employees had a total of 70 injuries that required them to miss a day of work last year.

"That's not just the best in the industry, it's world-class performance," he said, adding that the company still had room to improve.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Chevron's Board to Cut Compensation for Executives Due to Safety Issues

Chevron Corp.'s board is cutting compensation for its chief executive and other top executives in the wake of a string of accidents and other operational problems since late 2011, according to people familiar with the matter.

Chevron's board on Wednesday trimmed equity awards by 11% and bonuses by at least 10% for Chairman and CEO John S. Watson and several other executives, one of the people said.

"When things go poorly, the pay should reflect it," this person said. The directors "absolutely want to deliver a message to management."

Chevron has been performing well financially. But in February, the company disclosed it reduced the number of stock-options and performance shares awarded to Mr. Watson from last year, without revealing the bonus cuts or explaining the cause of the reductions. Mr. Watson's 2012 compensation package was valued at $24.7 million, about half of which came from equity grants awarded the previous year.

The same equity awards, which are tied to how Chevron's stock performs, were reduced for four other top executives, according to filings with the U.S. Securities and Exchange Commission.

Lloyd Avram, a spokesman for the company, said the board was still meeting.

"The company does not have a comment to provide until such time as the board meeting has concluded," he said.

Unlike other oil companies criticized in recent years for lavishly rewarding top brass, Chevron's executive pay practices have not prompted controversy among shareholders. An advisory vote on its compensation for 2012 was supported by 95% of votes cast at Chevron's annual meeting last year.

The San Ramon, Calif.-based energy giant has been leading its peers in profit and stock performance; shares are up 12% this year, outperforming larger rival Exxon Mobil Corp., and its $233 billion stock-market value recently topped that of Royal Dutch Shell PLC.

But Chevron has also suffered a string of operational setbacks since late 2011. Oil leaks from the seafloor at its Frade field off the Brazilian coast in November 2011 and March 2012 led the company to halt production there, forfeiting daily production of 29,000 barrels of oil and its equivalent in natural gas. The field has yet to restart and Chevron is still fighting the resulting legal quagmire.

In January 2012, a drilling rig in Nigeria operated by a Chevron subsidiary exploded, resulting in two deaths. And in August 2012, a huge fire broke out at its Richmond refinery after a badly corroded pipe ruptured. A state agency said in January it would seek fines totaling nearly $1 million for the incident.

Safety has become critical for oil companies operating under increasingly tough regulatory scrutiny, a concern heightened by the 2010 BP PLC Gulf of Mexico oil spill.

Mr. Watson earlier this month touted Chevron's safety performance to analysts in New York, saying that its 250,000 employees had a total of 70 injuries that required them to miss a day of work last year.

"That's not just the best in the industry, it's world-class performance," he said, adding that the company still had room to improve.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Innovation: Chevron’s ‘i-field’ Links Performance, Savings

USNews.com has a good read on Chevron’s digital investments, which the company says will save up to a billion dollars a year in operating costs in 2016. The linchpin is Chevron’s digital oil field, the “i-field,” which is short for “intelligent field.” USNews explains:

“Chevron's i-field harnesses advanced technology and communications to improve performance at 40 strategic assets throughout the world, including some of its biggest and most productive oil and gas fields. The company is rolling out six to eight mission-control centers focused on separate business areas, ranging from machinery to drilling to wells and reservoirs, that monitor those assets in real-time and rely on sophisticated computer algorithms for early detection of problems. From Chevron's perspective, the i-field is now essential to its global operations, which span six continents.”

Chevron isn’t the only company doing these things (USNews notes that Shell and ConocoPhillips have their own versions), but it is recognized as one of the oil and natural gas industry’s leaders. Basically, to overcome the global and labor-intensive characteristics of oil and gas development, Chevron has digitized a number of its operations. USNews:

“Chevron has deployed thousands of tiny sensors, only millimeters or centimeters in size, that monitor field operations and transmit data, both wired and wirelessly, back to central locations. The sensors instantaneously track pressure, temperature, and other readouts and aid with the mapping of underground fuel deposits, allowing the company to maximize production. Chevron also employs analytics to evaluate data streams in real-time from oil wells, drill rigs, ships, and elsewhere.”

The company has two mission-control facilities in Houston that oversee drilling and machinery support and two others in Lagos, Nigeria, and Covington, La., that monitor deepwater drilling. USNews:

“High above Houston in an office tower, a tech-savvy team at Chevron's machinery support hub monitors thousands of pieces of equipment, in real-time, across every continent except Antarctica. Using software to analyze data transmitted by sensors, it conducts ‘predictive intelligence’ to pinpoint when equipment, such as rotating devices called compressors, needs maintenance ‘so we can change out parts before they break down,’ [Chevron Energy Technology President Paul] Siegele says.”

USNews includes some examples where the technology came into play. The machinery support center sensed that a compressor in one of Chevron’s Asian business units was experiencing valve failure. On-site inspection confirmed the problem and the valve got fixed. Another time, equipment at Chevron’s Sanha oil and natural gas field off the coast of Angola was showing an irregularity, which the team in Houston detected. A repair was made, and the company saved millions of dollars in potential damage and lost production.

Again, Chevron figures it already is saving in the millions of dollars and says that will become billions when the “i-field” and a general operational overhaul are fully implemented in four years. Efficiencies and savings, of course, mean innovating companies, like Chevron, can invest more in energy exploration and development, which is a good thing.

View the original article here

Innovation: Chevron’s ‘i-field’ Links Performance, Savings

USNews.com has a good read on Chevron’s digital investments, which the company says will save up to a billion dollars a year in operating costs in 2016. The linchpin is Chevron’s digital oil field, the “i-field,” which is short for “intelligent field.” USNews explains:

“Chevron's i-field harnesses advanced technology and communications to improve performance at 40 strategic assets throughout the world, including some of its biggest and most productive oil and gas fields. The company is rolling out six to eight mission-control centers focused on separate business areas, ranging from machinery to drilling to wells and reservoirs, that monitor those assets in real-time and rely on sophisticated computer algorithms for early detection of problems. From Chevron's perspective, the i-field is now essential to its global operations, which span six continents.”

Chevron isn’t the only company doing these things (USNews notes that Shell and ConocoPhillips have their own versions), but it is recognized as one of the oil and natural gas industry’s leaders. Basically, to overcome the global and labor-intensive characteristics of oil and gas development, Chevron has digitized a number of its operations. USNews:

“Chevron has deployed thousands of tiny sensors, only millimeters or centimeters in size, that monitor field operations and transmit data, both wired and wirelessly, back to central locations. The sensors instantaneously track pressure, temperature, and other readouts and aid with the mapping of underground fuel deposits, allowing the company to maximize production. Chevron also employs analytics to evaluate data streams in real-time from oil wells, drill rigs, ships, and elsewhere.”

The company has two mission-control facilities in Houston that oversee drilling and machinery support and two others in Lagos, Nigeria, and Covington, La., that monitor deepwater drilling. USNews:

“High above Houston in an office tower, a tech-savvy team at Chevron's machinery support hub monitors thousands of pieces of equipment, in real-time, across every continent except Antarctica. Using software to analyze data transmitted by sensors, it conducts ‘predictive intelligence’ to pinpoint when equipment, such as rotating devices called compressors, needs maintenance ‘so we can change out parts before they break down,’ [Chevron Energy Technology President Paul] Siegele says.”

USNews includes some examples where the technology came into play. The machinery support center sensed that a compressor in one of Chevron’s Asian business units was experiencing valve failure. On-site inspection confirmed the problem and the valve got fixed. Another time, equipment at Chevron’s Sanha oil and natural gas field off the coast of Angola was showing an irregularity, which the team in Houston detected. A repair was made, and the company saved millions of dollars in potential damage and lost production.

Again, Chevron figures it already is saving in the millions of dollars and says that will become billions when the “i-field” and a general operational overhaul are fully implemented in four years. Efficiencies and savings, of course, mean innovating companies, like Chevron, can invest more in energy exploration and development, which is a good thing.

View the original article here